Will vs Trust: Learn the Differences!
Americans are on the edge because several governmental proposed social programs require massive revenue sources. More taxes may accrue while passing wealth down from generation to generation. The use of the right estate planning tools can help save on taxes while holding assets on behalf of beneficiaries.
Call California’s top-rated estate planning attorney, Hess-Verdon, at (949) 706-7300.
Will vs Trust
Learn Why a Trust and Will are Viable Options!
Most people have heard the words “trust” and “will,” but not everyone knows the difference between them. Most Americans use both wills and trusts in their estate plans because they serve different purposes.
Your Will instructs your executors how to handle your affairs, including distributing your assets upon your death. Your trust entrusts a third party such as a bank or lawyer with the fiduciary responsibility to hold title to your assets for the benefit of your heirs and other beneficiaries.
In a living trust, an individual’s there are assets, and there is trustee. The creator of the trust, also known as the grantor, appoints the trustee to be the beneficiary’s guardian and manager of their assets during their lifetime.
They call it a living trust because you create the trust while you are still alive. A living trust is revocable since you can change its terms or cancel it any time you wish.
Trusts take effect immediately upon creation, whereas wills go into effect after your death. Wills are oversighted by an estate executor, while for a trust, the person in charge is the trustee.
Many forms of trusts reduce or eliminate capital gains and estate taxes. Wills don’t change your tax obligations in life or after death. A will comes into effect after you die. On the other hand, a trust can begin distributions before death.
What is a Will?
A Will is a legal document prepared by an individual to declare their wishes regarding distributing their assets and wealth after their death. You can also use a will to give instructions concerning the care of your underage children if you die.
Why do we need a Will?
All adults should have a will. Take the time to create a last will if you have savings, a home, a car, and dependents. State laws and court rulings govern the distribution of assets unless a Will is provided. Your loved ones, including children and spouses, may not get the support they deserve if you pass away without a Will.
Types of Wills
A valid and legal Will can take many forms, and the type you choose depends mainly on the size and complexity of your estate.
Simple Wills: The simple Will has very few conditions. It gives you the freedom to express your wishes clearly. It’s slightly misleading to call this Will “simple” because it can accomplish quite a lot. (It is still possible to choose an Executor). If you have minor children or dependents, you can designate a guardian.
Testamentary Wills: These are trusts written inside a will. Unlike standard trusts, a testamentary trust is not set up until after death. In most cases, testamentary trust beneficiaries are typically people that require extended care over time – examples include people with disabilities of minor children.
Joint Wills: Joint Wills and Mutual Wills have plenty in common, but Mutual Trusts have two documents, while Joint Wills only include one. You can create a joint will if the primary beneficiary of your estate is your spouse and your children are the final beneficiaries. Estate plans for two people such as this are called a joint estate plan. Joint wills become irrevocable (meaning they may not be changed) when one partner passes away. Change is possible while both parties are alive.
Online Wills: It is just as the name suggests. It offers adequate protection for a fraction of the cost of wills created in person if done correctly. Just ensure that the providers of this option are authentic and authoritative by reading past customer reviews. You want to make sure the company preparing your legal documents will be able to stand up to scrutiny when questions are asked.
Deathbed Wills: This is a will created in the last minutes before the maker dies. It is always advisable to write your Will when you are in good health. As a result of the extreme circumstances surrounding a deathbed will, people may contest the Will on accounts of duress and incapacity.
What Does a Will Contain?
Wills come in many forms, but all will likely contain some core components.
Executor: The Executor is responsible for carrying out your wishes as stated in your Will. Executors can be spouses, family members, friends, lawyers, or adult children. Your Will can have joint executors.
Guardianship: Parents can use a Will to designate a guardian for their children. When you know your kids are in the best of hands, you are at peace.
Assets: Your Will specifies your assets, including money, cars, homes, and how and to whom you want to leave these assets. By identifying who gets your estate, you can ensure that your years of sweat and hard work benefit those you leave behind.
Funeral arrangements Instructions: It is essential to specify funeral arrangements and what you wish to happen to your remains as part of your estate planning.
California Estate Attorneys
Hess-Verdon is in Newport Beach. We have 30 years’ experience in estate planning law. We have helped thousands of clients protect their estate, grow their estate, and pass it down to their loved ones through various legal instruments.
Our estate lawyers can help you administer or contest a Trust or Will. We also have expertise in business law and elder abuse law. Expect personalized services that put you in control.
What is a Trust?
A trust is an arrangement where a third party, the trustee, holds your assets for your beneficiary on a fiduciary basis. Trusts pass assets to beneficiaries, and trust documents specify precisely when and how that occurs.
Trusts prevent probate, allowing beneficiaries to access assets more expediently than through wills. Irrevocable trusts do not count as part of your estate for tax purposes, so that means you won’t owe taxes at death.
Moreover, a trust may protect assets from creditors, greedy siblings, spendthrift heirs, ex-spouses, or future spouses of your current spouses.
What Is The Purpose of a Trust?
A Trust is an excellent vehicle for ensuring that you and your family are cared for. It enables the transfer of what you have when you die to whoever you want, in the manner you want. In addition, it can minimize the costs of legal fees, eliminate court procedures, and save you from taxation.
Americans create various types of trusts for different purposes. Asset protection and provisioning for minors are some of the leading reasons to create a trust.
Your California trust will provide you with the ability to take care of yourself and your family. It will help to protect and grow your wealth. Finally, it will reduce your tax burdens and ensure the proper execution of your end-of-life plans.
Other benefits of trusts include:
Wealth control. A trust helps to control when and who distributions are made. When there are complex circumstances like children from multiple marriages, you may designate to whom the trust’s assets will pass after your death.
Legacy protection. You can use a trust to protect your estate from creditors, divorced spouses, or beneficiaries who don’t have prudent money management skills.
Protecting your privacy and saving your estate from probate
Unlike wills, trusts don’t go through probate. An estate’s probate records are public. A trust avoids probate and preserves the assets while also reducing taxes and court fees.
Types of Trusts
Trusts are revocable if they allow you to change them or revoke them. In conjunction with a will, a revocable trust, typically a living trust, can help pass assets to trust beneficiaries quickly if you own high-value property.
If a trust is irrevocable, it cannot be amended except under extremely rare circumstances. An irrevocable trust offers various benefits, including asset protection and reducing taxes. It is much better compared to a revocable trust.
The grantor of an irrevocable trust does not own the property and assets of the trust. Therefore, they are not included in that their tax liabilities.
The majority of tax-saving types of trusts are irrevocable trusts. The proper establishment and management of such a trust often require the assistance of an estate planning attorney. At Hess-Verdon, our doors are open for all your advanced estate planning needs.
Other common types of trusts
During estate planning, you may come across several different trusts. You can choose from any special options below if you need your trust to handle several unique tasks.
Testamentary Trust: You would create a testamentary trust, or will trust, as a section of your last Will. Upon your death, it manages your assets and distributes them. It allows you to stipulate and limit the circumstances under which beneficiaries can access trust assets. For example, your child only becomes eligible to get the bungalow when they turn 18. Your Will can also be poured into an existing trust.
Living Trust: Living trusts, also known as Inter Vivos trusts, are formed during the grantor’s lifetime. Countless types of living trust exist. When it comes to passing assets on to the right people, a living trust never disappoints.
Bypass Trust: This is one of the estate planning strategies to minimize estate taxes. Another name for it is the AB trust. A bypass trust is created when a spouse dies so that assets pass to the surviving spouse with minimal estate taxes.
Charitable Trust: These trusts help you donate to nonprofit organizations and generate a steady income stream for yourself or your beneficiaries. Generally, charitable trusts fall into two types: charitable lead trusts (CLTs) and charitable remainder trusts (CRTs). Both allow you to maximize potential capital gains, remove estate tax obligations and minimize income taxes.
Generation-Skipping Trust: You may want to consider establishing a generation-skipping trust if your sons and daughters are well-off. Rather than passing the assets on to your children, a GST helps you transfer them to your grandchildren. The assets can generate income, though, so you can give those incomes to your children.
Joint trust: Usually, joint trusts are funded by two people and administered jointly by them. It is beneficial to use this type of trust in an estate plan if you live in a community property state and wish to handle your assets similarly.
QTIP trust: Rather than provide trust income for their surviving spouse, qualified terminable interest property trusts (QTIPs) allow someone to gift trust assets to their heirs after their death. You can combine a QTIP with a bypass trust for remarried people or children from previous marriages.
Special Needs Trust: SNTs provide for trust beneficiaries with disabilities while enabling them to retain their eligibility for government support programs. Grantors can leave trust assets to a special needs child who will not be disqualified from receiving benefits such as Medicaid and Supplemental Security Income (SSI). An adult or nonprofit organization can set up a special needs trust.
Spendthrift Trust: Your beneficiaries can get restricted access to assets designated to them through a spendthrift trust. This type of trust lets you dictate when and how they can access them if you think they will waste their inheritance. You may decide that beneficiaries only receive income from the assets if they do not receive the total principal amount of the assets.
How Can Hess-Verdon Help You with Wills and Trusts?
We will advise you on all your options, including if a Trust is appropriate for your circumstances. Hess-Verdon estate planning attorneys also assist executors and trustees on their duties and responsibilities, either on an ongoing or one-off basis.
If you want, we can handle the compliance and tax administration aspects of estates and trusts on behalf of the executors and trustees. If you are getting started, we can help you create the right trust deeds and other legal documents to protect your estate now and in the future.
We will help to create terms that give you the best tax advantages and greater control. Additionally, we can advise on trustee appointments and retirements.
If you would like to contact our team of estate planning specialists, please call Hess-Verdon at (949) 706-7300.
Meet The Team
- Charitable Remainder Trust (CRT)
- Grantor Retained Annuity Trust (GRAT)
- Qualified Personal Residence Trust (QTIP)
- Learn more on estate planning.
Are you looking for a trust attorney in the Newport Beach area? When it comes to the practice of Trust and estates, it can be difficult finding an attorney that’s experienced in handling your specific issues.
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